Marks & Spencer Sales Growth Accelerates

By Sarah Shannon -
Jul 13, 2011

Marks & Spencer Group Plc (MKS), the
U.K.’s largest clothing retailer, reported sales growth that
missed some estimates because of stagnant general-merchandise
revenue and said the industry outlook remains difficult.

Sales at U.K. stores open at least a year rose 1.7 percent,
excluding value-added tax, in the 13 weeks ended July 2, the
London-based company said today. The median estimate of eight
analysts compiled by Bloomberg was 2 percent.

Same-store sales of general merchandise, which includes
clothing and home-furnishings, were unchanged, missing the
median analyst estimate of 1 percent growth. Finance Director
Alan Stewart said the quantity of goods sold fell as Britons
bought smaller numbers of more-expensive items. U.K. revenue
growth came solely from food, where same-store sales rose 3.3
percent after the introduction of more than 500 new items.

“The coming quarter and coming half-year will be a very
challenging one,” Chief Executive Officer Marc Bolland said on
a conference call today, citing pressure on consumers’
disposable incomes and increased commodity prices.

Marks & Spencer fell as much as 3.2 percent in London
trading and was down 9.2 pence, or 2.5 percent, at 363.8 pence
as of 11:22 a.m. The shares have slipped 1 percent this year.

General merchandise sales were “disappointing,” said John Guy, an analyst at Royal Bank of Scotland in London. Business
should have been boosted by a two-week earlier start to the
retailer’s summer discount period, he said.

Market Share

Bolland said the decline in clothing and home-furnishing
volume was down to the weakness of the overall retail market.

The retailer said its share of the U.K. food market
increased by 0.1 percentage point to 3.8 percent. New products
introduced in the quarter included ‘Simply, Fuller, Longer’
ready-meals and a broader healthy-eating range.

Online revenue rose 13 percent, while international sales
climbed 7.8 percent in the quarter, the company said. Bolland
plans to expand online and in markets outside the U.K. to reach
sales of 12.5 billion pounds by fiscal 2014.

The retailer, which hosts its annual general meeting in
London today, didn’t change its forecast for gross margin in
fiscal 2012 to be as much as 25 basis points higher than last
year. Average selling prices rose 7 percent in the quarter due
to a “touch more” price inflation and consumers buying more of
the company’s higher priced lines, Stewart said.